The Everest circus is leaving town. With the decision to cancel climbing this year, Sherpas from the 39 expeditions camped at the foot of the mountain are dropping tents and packing gear. Helicopters fly over the Khumbu Icefall that leads into the Western Cwm, recovering equipment stashed there before the accident that killed 16 Sherpas and other high-altitude workers on 18 April.

On the narrow trail to base camp from the small settlement of Gorak Shep, yak trains pass each other, those returning from the mountain laden with equipment. Porters rush to base camp, taking advantage of suddenly inflated wages as expeditions quit the mountain. Whatever you think of the notion of Everest as the ultimate tourist attraction, to see this immense logistical effort is impressive.

There has never been a week like this in the history of the mountain. As one expedition organiser said: "This is a seminal moment. The whole system will change now." However much purists yearn for the days of George Mallory or Edmund Hillary, the unavoidable truth is that Everest is now big business in a poor country and its worst disaster has put that business – and how it is regulated – under the microscope.

From base camp, it's impossible to see the summit. The hundreds of colourful tents that spread for over a mile along the Khumbu glacier are so close that the peak's west shoulder blocks the view. Yet Everest's most dangerous feature is all too obvious. The icefall emerges from the Western Cwm, a blocky white river pushing down the narrow gap between Everest and its neighbouring peak of Nuptse. Not only is the icefall dangerous in its own right, it is also threatened from above. Looking up hundreds of metres, I could see the ice cliff, or serac, that calved tons of ice that Friday morning.

As factory floors go, it's hard to imagine anywhere more dangerous. And that is what the Khumbu Icefall is: a place of work for the Sherpas and other high-altitude workers who make their living there. It is hard to imagine anything in nature more capricious or beyond human control, yet Sherpas ferrying supplies to the upper slopes must pass through this labyrinth up to 30 times during the climbing season. They are playing Russian roulette for a living.

The aftermath of a predictable disaster was shock and grief. These men had families, children, wives, fiancées. Photographs of Sherpa women grieving at funerals held in Kathmandu's Buddhist district of Boudha were the most eloquent expression of the human cost of so many lives wiped out. But even as the pujas for the souls of the Sherpas were being held, a new mood took hold: anger. Its first and most obvious target was the government, which had announced a compensation package of 40,000 Nepalese rupees (£245). This was a derisory sum to the Sherpas, whose funeral rites could cost 10 times that figure, and a demonstration last Monday followed the religious ceremonies.

It's calculated that, of the £60m climbing Everest turned over this season in Nepal, around £7m will stay in the country. Of that, the government collects about £2.4m in peak fees and other permits.

The daughter of Ang Kaji Sherpa, one of the victims of the avalanche, collapses during a cremation ceremony. Photograph: Narendra Shrestha/EPA

Last week the government had much bigger priorities than the fate of those climbing Everest. It has been struggling to pay the debts of the state-owned oil company; consequent shortages have meant queues hundreds of vehicles long at petrol stations.

Amid growing calls for an immediate end to climbing on Everest as a mark of respect to the dead, Madhusudan Burlakoti, a senior official at the tourism ministry, quashed the idea that the season should end: "The expeditions will continue up the mountain. There is no reason to think it's unsafe now because of this natural disaster. These things happen in cycles and we will address them as they come."

Such breezy reassurances did nothing to quell the growing anger among Sherpas that it is they who take the risk on Nepal's mountains and the government that takes a disproportionate share of the profits. On Everest, with a four-day climbing moratorium in place, hundreds of Sherpas from Khumbu, the district surrounding the mountain, returned to their villages to be with their families.

Those who do not come from the region remained in camp, talking about what should happen next. Younger workers from other regions of Nepal that in the last decade came under the influence of Maoist political tactics of coercion and threat found the atmosphere of grief and anger the perfect moment to pursue a more aggressive agenda.

Two strands emerged at base camp, a 13-point plan demanding reform of Sherpa working conditions and a greater share of revenue for local people, and a more strident, less developed agenda that demanded an immediate end to climbing. A religious ceremony on Tuesday ended in a well-orchestrated demonstration.

More darkly, the team of Sherpas known as the Icefall Doctors who fix the ropes up this part of the mountain were told not to go back to work. Filmmakers were ordered to put their cameras away. One foreign expedition had communications cables cut during the night. Climbers and Sherpas alike speak of an atmosphere of fear and intimidation.

Last year, following an assault on three European climbers by an angry mob of Sherpas at camp two, the government promised better security on the mountain, including a "facilitation office" with a police and military presence. It also promised that expedition liaison officers, who rarely bother to visit base camp, would be more visible. None of this happened. When the bodies of the Sherpas were airlifted to base camp, there were no officials on hand to record the names of the dead.

In a bid to shore up government authority, Nepal's tourism minister, Bhim Acharya, flew to base camp on Thursday, an oxygen mask on hand, to bolster morale, agree to most Sherpa demands for improved working conditions, and promise foreign climbers their permits would be valid for five years should their expeditions quit the mountain.

It was already too late. The exodus was under way, and as each of the bigger, better-resourced teams quit, the rest followed. Dave Hamilton, leader of British commercial expedition organisers Jagged Globe, told me: "The season is over. Almost all teams, including us, have cancelled for a variety of reasons. But it really comes down to the vast majority of Sherpas do not want to work. The minority who do have been threatened and intimidated into joining the action."

Away from Everest, the human cost of the tragedy and the equivocal place of climbing mountains in Sherpa culture began to percolate. Sitting in a trekkers' lodge in the small village of Pheriche, at 4,200 metres a staging-post on the trail to Everest, Dechen Sherpa was playing with her eight-month-old son, Karma.

"I think he's going to be an engineer," she told me. "He's always grabbing things with his hands and turning them over."

"Not a climber then?"

"No, I don't want him to be a climber. But for some Sherpas it's a good way to make money. Not everyone has a lodge like this."

If the tragedy on Everest has done one thing, it has broadened the understanding of who Sherpas are. In a moving blog that explored issues of identity and the personal cost of their work in the mountains, Jemima Diki Sherpa wrote of the unique place they hold in the popular imagination: "It is something to behold, the open-hearted enthusiasm that the Sherpa name elicits in the western mind. It is the branding mother-lode – stimulating a vague positive association founded on six-odd decades of mountaineering myth-building."

The consequences of living in what she calls "a very large, very coveted piece of real estate" have transformed Sherpa lives. Across the Himalaya, there is no valley like the one that descends from the slopes of Everest. The Sherpa capital of Namche Bazaar is the most affluent district in the whole of Nepal, its prosperity built off the back of the region's tourist trade.

The notion that the business of climbing Everest is morally bankrupt has gained currency in the aftermath of 18 April. Journalist Tanya Gold dismissed those climbing the mountain as "blithe cretins" who have turned "an explicit wasteland to a moral and internal one, which also serves as a perfect metaphor for the contempt in which we hold the planet".

Yet the Everest region is no wasteland to the Sherpas, and to characterise them as oppressed victims of a strange, over-privileged narcissism on the part of those who pay around $60,000 to pursue their ambition is to miscalculate the depth of expertise Sherpas have developed and the self-respect they take from their work.

Walking up to the small collection of lodges at Lobuje on the trail to base camp, I fell in step with Tashi Sherpa from the Rolwaling valley, which neighbours Khumbu. He is an internationally accredited mountain guide, one of a growing number in Nepal, and isn't shy in looking forward to the day when he and his colleagues displace western guides. The notion that men like this are passive victims is laughable.

Tashi had expected to make his tenth ascent of the mountain this spring: "I won't be going, out of respect for my friends. But it's going to be very difficult for Sherpas who don't have any other work. What are they going to do? The government takes the money from Everest and doesn't put anything back."

That sentiment may win support among expedition organisers and the many western friends of the Sherpa, but it can breed resentment in Kathmandu. With a quarter of Nepal's GDP earned from foreign remittances, the fate of Nepalese working abroad is a more burning issue than well-paid climbing Sherpas. As a Kathmandu friend put it to me: "There are two body bags a day coming home from the Gulf. Nobody writes about those."

The trekking industry that has grown up in the wake of mountaineering expeditions is also full of horror stories of porters from ethnic groups without the same profile as Sherpas who are simply abandoned when they get sick and die unrecorded by the media, their plight a matter of ignorance among their foreign employers.

So although the tragedy on Everest has caused outrage, the immense attention it has generated is seen as an opportunity to put pressure on the government to take regulation seriously – or hand it to an organisation that will. Where there is no shame, it seems there is no progress.

Russell Brice is the director of Himex, one of the big expedition organisers working on the mountain with more than two decades' experience. He has been calling on Nepal's tourism ministry to allow helicopters to stock camp two and save Sherpas trips though the Khumbu icefall.

"They've rejected these ideas in the past," he says, "but maybe they'll listen now. It will mean fewer rotations [through the icefall], the same number of Sherpas employed with a small decrease in their income. But they'll be much safer as a consequence."

The morality of paying men to work in such a dangerous place as the Khumbu icefall remains a complex issue. Sherpas I spoke to were in two minds about the end of the season. Tashi Sherpa, who works for Himex, had been home to see his family in the aftermath of the accident. "They're not asking us to stop," he says, "they're just asking us to come back."

Lachhu Chhetri, who works in Himex's impressive kitchen, feeding clients, was less equivocal: "It's a pain in the arse, to be honest. Where am I going to find work now?" Those who face the risks of the mountain make far more than base camp staff.

For Amanda Jones, chief operating officer for Infrastructure New South Wales, this is the second time she has had to abandon her expensive ambition to climb Everest. Two years ago she was part of a Himex expedition that quit the mountain after Brice and his lead Sherpa, or sirdar, Phurba Tashi, deemed the peak too dangerous.

"I completely respected that decision. It was about the danger to the Sherpas. This tragedy was the kind of accident Russell and Phurba Tashi had in mind in 2012. What's important to me as an aspiring Everest climber is that management of the mountain is improved."

In the past, negative headlines about Everest have improved things. Stories of garbage and human waste have led to changes that have left base camp tidier than many trekking lodges. Brice has calculated that it costs each climber $5 to defecate on the mountain, using a bio-degradable bag that is shipped to a specially constructed septic tank in a neighbouring valley.

The social impact of the Everest business is a far more complex issue. The deaths this spring will resonate down the generations, as Jemima Sherpa records: "There will be gaps, like missing teeth. If the remaining teeth shuffle forward – like adolescents now a little less awkward than last year move a little closer to the fire – [they will] fill the spaces of the ones that are missing."